Microsoft bond issue causes rumors of SAP deal

Microsoft (MSFT) would almost certainly like to buy SAP (SAP), the second largest enterprise software company in the world, after Oracle (ORCL). It would give Microsoft a much bigger footprint in the software sector that caters to large businesses and governments. Cuts in overlapping costs could save hundreds of millions of dollars.

The speculation about an M&A deal between the two companies was rekindled when Microsoft announced its first bond offering, which it will make even though it has no existing debt and has over $25 billion in cash on its balance sheet.

The debt offer will raise $3.75 billion, but the appetite of investors who want in on the deal is an indication that the world's largest software company could raise more capital with ease.

Because of Microsoft's triple-A rating, the company will only have to pay a very small premium over Treasuries, a sign that the market still believes that the company's huge cash flow is safe for years to come.

A buy-out of SAP may be an ideal business transaction, but it would raise antitrust hurdles that the companies could not overcome. Microsoft server and office software is already widely used by corporations. The E.U. and U.S. authorities might make the case that adding SAP would give Microsoft too much pricing leverage in the enterprise software world. Given Microsoft's experience with antitrust regulators, the chances that a transaction to buy SAP would close are probably remote.